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Beyond the Sweatshop: Developing Socially-responsible Supply Chains

One of the most contentious realities of the new economy is that consumers’ concern for the social impacts of any given product or service is increasingly driving their purchasing behavior. This has left companies large and small scrambling to account for those impacts, which can often be difficult to parse and even more difficult to measure. “Can we come up with a way of working along with the private sector,” asks Kyle Cahill, Senior Program Officer for the Poverty Footprint Project at Oxfam America, “for them to start approaching social issues with the same rigor and reporting that they use to look at something like climate change, or water?” In other words, how can companies measure the impacts as they develop socially-responsible supply chains?

Cahill will discuss how the apparel industry in particular is answering this question in response to public concern over sweatshop labor during a panel called “From Boycott to Buycott: Turning the Anti-sweatshop Rhetoric Upside Down,” at next weekend’s Net Impact Conference – 2020: Vision for a Sustainable Decade.

Oxfam’s Poverty Footprint project is an ambitious undertaking intended to provide a systematic, measurable methodology that corporations can use to evaluate and influence their impacts on actual people and communities – specifically in terms of poverty. But understanding poverty – like most social issues – is not a simple matter.

Unpacking the black box

“The environmental community has done a tremendous job in being able to properly demonstrate the value in measuring environmental impact,” Kyle says. “The challenge is trying to do the same around social impact. For most companies, social impacts are this kind of black box or nebulous issue beyond the core labor issues that many industries have been tackling…There are several things that can either cause a person or community to be impoverished or bring them out of poverty, so you have to take this multi-dimensional approach when you’re trying to understand how people are being impacted.”

The Poverty Footprint starts by identifying those multiple drivers using both qualitative and quantitative measures. “So if you’re doing a carbon footprint, you’re looking at carbon and methane and other emissions, but in a poverty footprint you’re looking at really five areas.” Those areas are:

Stability and security (e.g. ability to deal with personal or natural disaster, crime and violence)

The Poverty Footprint methodology, says Kyle, “adopts a people-centric approach to analysis and lays out a pretty clear value proposition both for people and communities in poverty, and for companies as well.” Whether in the garment industry or agriculture or technology, there are several core areas of a company’s operations that tend to influence the above poverty drivers. Those impact areas include an organization’s role in its value chain, its macro-economic impact on a given region, its impacts on institutions and policy, its environmental practices from location to location and, finally, the services or products a company is marketing and how it does so.

The case for poverty metrics

When it comes to supply chains, the old adage what gets measured gets managed holds true; Kyle describes the growing complexity of these supply chains as “almost like piles of spaghetti because of globalism.” A Poverty Footprint can help unravel that complexity. “For the first time,” says Kyle, “companies can have a better understanding of what is positive, what can be replicated, shared, expanded – and where the challenges are.”

Global product manufacturer Unilever, which worked with Oxfam to pilot the footprint methodology, is but one example of this. Together, the organizations did field research into Unilever’s Indonesian supply chain, including local farmers and traders, factory workers and management, communities that both receive Unilever’s philanthropic support and are targeted by its advertising, and more.

The study revealed that the company was using twice as many people for distribution than production, and more of them were part-timers than the company assumed. This discovery allowed Unilever to identify critical levers like labor engagement and unionization, and increased access to credit, as potential ways to increase financial stability among this population and, thereby, productivity.

Bená Burda, founder of clothing manufacturer Maggie’s Organics and a co-panelist with Cahill at next weekend’s “From Boycott to Buycott” conference session, has also seen bottom-line benefits from a focused attention on the social impact of its operations. Sourcing cotton from worker-owned cooperatives in Nicaragua, including one supplier that pays its temporary workers over 30% more than the minimum wage, gives the company an opportunity to work more closely with its growers to improve production yields and quality.

And these are just two on-the-ground examples of how companies can use social metrics to improve a company’s business model. Other advantages to such insight include risk mitigation (both operational risk and at the brand level), better access to a more consistent labor force, improved ability to source goods within a more regular system, and even a greater understanding of and access to base-of-the-pyramid markets.

Piloting methodologies through collaborative efforts

But developing metrics for social issues is challenging. The partnership between Oxfam and Unilever required answering the extremely difficult question “how do we come up with a language and a set of measures or metrics that speak to companies across industries?”

“From our perspective,” responds Cahill, “the only way you do that is by working with companies. We’re doing something that has never been done before on this scale, and the only way we can come up with a consistent way of measuring is by working with companies and piloting methodologies with them…This is not something that can be done in a cubicle, or at a desk, or on the phone, or through a computer. The bulk of the footprint information has to be gathered on the ground – through surveys, focus groups, one-on-one conversations, by convening stakeholders. This is new for companies.”

It may be new, but the insight gained is strong motivation, for large multinationals like Unilever to smaller ventures like Maggie’s, to embrace the challenge. “It generates an amount of learning, knowledge, and collaboration that many companies have never engaged in before,” Kyle says. “There’s a lot to be gained by companies who have never been in conversation with a supplier or stakeholder that far up the value chain. [It’s a way] for companies to ensure their operations in these markets can thrive in the long run.”

“Beyond the Sweatshop: Developing Socially-responsible Supply Chains” was originally published on Triple Pundit.